Entry of the new Alternative Dispute Resolution Act into force, by replacing the former and outdated Reconciliation Act (OG no. 18/11), marked the 20th anniversary of the establishment of the legislative framework for mediation in the Republic of Croatia.

The new Act introduced much needed reforms aiming to provide stronger control of mediators, as well as to relieve Croatian courts in cases in which it is possible to resolve the dispute amicably. Also, new regulation should increase availability of dispute resolution through alternative (amicable) manner.

The willingness of the parties to settle disputes amicably has a significant impact on the speed with which the same proceedings are resolved as well as on the reduction of the costs that such court or out-of-court disputes inevitably require.

Significance of the new regulation

 The new Act entered into force on 29th June 2023 and its entry represents a significant part of Croatia’s National Recovery and Resilience Plan (adopted in order to mitigate economic and social consequences of the pandemic) in the part related to the increase of the efficiency of the judicial system for greater trust of citizens.

It is important to emphasize that the Act applies to all disputing parties in the Republic of Croatia, regardless of whether they have their domicile, residence or registered seat in the Republic of Croatia, in another EU member state or in third countries.

This article covers most significant novelties regarding the alternative dispute resolution, which are as following:

1. Expanding the definition of alternative dispute resolution

 Art. 4 para 1 of the new Act prescribes the alternative dispute resolution as any out-of-court or court proceeding in which the parties seek to resolve the dispute by agreement, including mediation and structured negotiations.

Terms mediation and structured negotiations are regulated for the first time as following:

• Mediation - any proceeding, whether carried out in court, in a mediation institution or outside of them, in which the parties seek to resolve a dispute by mutual agreement with the help of one or more mediators who assist the parties in reaching a settlement, without the authority to impose a binding solution on them.
• Structured negotiations - legally prescribed or agreed proceeding for resolution of a dispute in amicable manner in which the parties directly seek to resolve their dispute through settlement agreement.

1. Obligation to attempt an alternative dispute resolution proceeding before

    initiating court proceedings for damages

The new Act defines the obligation of the parties to attempt to resolve the dispute alternatively before initiating the litigation proceeding for compensation of damages. This obligation does not apply to proceedings initiated for compensation of damages from the employment relationship.

The aforementioned obligation will be deemed as fulfilled if:

1.  the alternative dispute resolution proceeding has been unsuccessfully concluded between the parties
2. or if one party has informed the other of its proposal or request together with supporting facts and has invited the opposing party to comply to the request or to participate in the alternative dispute resolution proceeding but the opposite party refused such a proposal or did not express itself within 15 days from the day of receipt of the proposal.

1. Introduction of Alternative Dispute Resolution Center

The Art. 6 of the Act anticipated the establishment of Alternative Dispute Resolution Center (hereinafter: the Center) as a public institution with its registered seat in Zagreb for promoting alternative dispute resolution as a more favorable manner for the parties to resolve disputes than the formal judicial one.

The Center, among other functions, conducts professional training and improvement of mediators, independently or in cooperation with mediation institutions. It also maintains the Register of Mediators and the Register of Mediation Institutions and ensures effective cooperation with judicial authorities.

Branches of the Center will also be established in three large cities in Croatia: Osijek, Rijeka and Split.

1. Mediation institutions

 Art. 4 para 1 point e) of the new Act states that a mediation institution is a legal entity registered with the Register of Mediation Institutions that organizes mediation or another legal entity designated to organize mediation by a special regulation.

The Center will grant consent for conducting training for mediators and for conducting training for trainers to an institution that has (i) at least three qualified persons to conduct training, (ii) a suitable space for conducting training and (iii) has adopted training programs. The consent for conducting mediation will be granted to an institution that has (i) at least three mediators and (ii) appropriate space for conducting mediation.

 Concluding thoughts

According to the Act, disputing parties who have chosen to initiate alternative dispute resolution proceeding in order to attempt to resolve the dispute do not lose the possibility of initiating court, arbitration or other proceedings due to the expiration of the limitation or preclusion period.

It is important to highlight that adoption of the pertaining implementing legislation to the Act is currently in progress.

Those organizational and procedural provisions together with the Act will form the complete general legislative framework for alternative dispute resolution in the Republic of Croatia and hopefully influence alternative settlement of conflicts in practice.

Authors: Anits Krizmanic, partner and Koralijka Devcic, associate